Author Tim Lawless Results

Market Wrap Q4 2016

SYDNEY

Home value growth in Sydney continues to lead all other capital cities and has picked-up a little over recent months. Over the 12 months to October 2016, Sydney home values have increased by 10.6% which is up from a recent low of 7.4% in March 2016. Over the past year, house values have increased by 10.9% compared to a more moderate but still strong 9.1% increase in unit values. Although value growth is accelerating in Sydney, it is still well below the recent peak of 18.4% in July 2015.

Although sales volumes have eased substantially over recent years, there has been an uplift in transaction activity over recent months. CoreLogic estimates that the 21,885 transactions over the three months to October 2016 were -15.2% lower than over the same period last year. It’s important to note that these estimates do not include unsettled sales and will revise higher as the record number of off-the-plan unit sales move through to settlement. There are a record number of off-the-plan high rise units selling which can take upwards of two years to build and subsequently settle.

Rental rates are unchanged over the past 12 months indicating historically weak rental market conditions. Over the 12 months to October 2016, house rents have fallen by
-0.3% compared to a 1.2% increase in unit rents. With value growth outstripping rental changes, gross rental yields are at the historically low level of 2.8% for houses and 3.8% for units.

Sydney homes continue to sell quickly, in fact the average time on market has fallen over the past two months. Homes currently take an average of 32 days to sell compared to 27 days a year ago however, two months ago they were taking 41 days to sell.

NSW Regional Outlook

Although regional New South Wales housing markets as a whole have seen values rise at a more moderate rate than in Sydney, value growth has outperformed many other capital cities, up 5.1% over the past year. Coastal lifestyle markets in particular are seeing strong demand and subsequent value growth, particularly those regions close to Sydney. On the other hand, mining and resource related regions have remained weak over the past year.

Transaction volumes in regional New South Wales have trended lower over the past year and are yet to show any sign of a reversal of this trend. Over the three months to October 2016, it was estimated that there were 14,549 houses and units sold which was -9.4% lower than the same period in 2015.

Rental rates across the regional markets have increased by 2.5% over the past year and the typical gross rental yield is recorded at 5.6% from 5.5% 12 months earlier.

MELBOURNE

Dwelling values in Melbourne have continued to rise over recent months and they have now increased by 81.8% since the end of 2008, not quite as strong as in Sydney but well ahead of all other capital cities. Melbourne dwelling values have increased by 9.1% over the past year and like Sydney, annual growth has rebounded higher over recent months. House values have increased by a much greater 9.6% over the past year relative to units which have recorded an increase of 5.2%. Although value growth has increased a little lately, it remains well below the recent peak level of growth recorded at 14.2% in September 2015.

There were 18,587 houses and units settled in Melbourne over the three months to October 2016. Although transaction volumes were -28.6% lower than over the same period last year, recent monthly data shows that sales volumes have started to lift. Additionally, we are likely to see transaction numbers revise higher as the record number of off-the-plan units complete their construction phase and move through to settlement.

Melbourne rents are increasing at a faster annual pace than they were a year ago with house rents up 2.6% over the year and unit rents rising by 2.7%. Rental rates are increasing but at a slower pace than values which has pushed yields down to historically low levels. Gross rental yields are currently recorded at 2.8% for houses and 4.0% for units.

Melbourne homes are selling quicker than in any other capital city and are transacting slightly faster than they were a year ago. 12 months ago, Melbourne homes were averaging 32 days to sell compared to 31 days currently.

VIC Regional Outlook

While Melbourne has seen strong value growth over the past 12 months, regional Victoria has seen much more tepid growth of just 1.4% over the last year. Regional Victoria is not yet seeing any substantial spill over from demand as values rise in Melbourne.

Over the three months to October 2016, it was estimated that there were 5,997 houses and units sold in regional Victoria which was -14.0% lower than a year earlier. Although sales are lower over the year, recent monthly data is pointing to a slight improvement in transaction activity.

The average weekly rent in regional Vic is currently recorded at $259 having increased by 1.0% over the past year. Value and rental growth has been fairly equivalent over the past year and as a result, average rental yields are unchanged over the year at 5.3% which is higher than the record low rental returns evident in Melbourne.

BRISBANE

Brisbane home value growth is following the trends of recent years with values rising by a moderate but sustainable pace. In fact they have increased by just 17.0% over the five years to October 2016. Dwelling values are 4.1% higher over the past year with house values driving most of the capital gains while units markets record a decline in values over the past year. Detached house values are up 4.7% over the twelve months to October 2016 compared to a -1.4% fall in unit values. The unit market remains a drag on the housing market and with a record pipeline of units under construction it is reasonable to expect that this market segment will continue to underperform detached houses.

There were 12,151 settled house and unit sales over the three months to October 2016 in Brisbane. Although sales volumes were -19.5% lower than the same three month period in 2015, monthly sales volumes have trended higher over recent months.

Rental rates have continued to fall in Brisbane with rents -0.9% lower over the year for houses and -2.7% lower for units. As a result of weaker rental markets than the change in values, gross rental yields have pushed slightly lower over the past year and are recorded at 4.1% for houses and 5.2% for units.

Although values continue to rise in Brisbane, homes are taking longer to sell than they were 12 months ago. A year ago the typical Brisbane home was averaging 43 days to sell compared to 57 days currently.

QLD Regional Outlook

Regional Queensland’s housing market remains diverse with lifestyle markets, particularly those in South-East Queensland, seeing values rise while most regions in Northern and western Queensland, particularly those linked to mining and resources recording ongoing value falls. Over the past 12 month, house values in regional Queensland have fallen by -1.0%.

The number of house and unit sales in regional areas of Queensland have trended lower over the past year however, recent monthly data points to a moderate lift in sales hinting at an improvement in buyer demand. Over the three months to October 2016 there were 13,424 sales across the region which was -13.2% lower than over the same period last year.

Rental markets have remained weak over the past year with rents -4.6% lower over the year. Gross rental yields remain quite high in regional Queensland at 5.4% which is unchanged over the year.

ADELAIDE

Adelaide has continued to record only moderate value growth over the year to October 2016, with values up 2.5%. Adelaide has consistently seen limited value growth over recent years with values rising by a total of just 7.5% over the past five years. Over the past year house values have increased by 2.7% while unit values have fallen by -0.3%.

Although value growth has been limited over the past year, a greater number of dwellings are selling relative to a year ago. Over the three months to October 2016, there were 7,033 settled house and unit sales which is 6.4% higher than over the same period in 2015.

Adelaide rents have recorded moderate declines over the past year for houses and units. House rents are -0.1% lower over the year while unit rents have fallen by -0.4%. With growth in house values outstripping the fall in house rents, gross rental yields have fallen to 4.0% over the past year. With both unit rents and values falling over the last 12 months, gross rental yields for units are unchanged a 4.7%.

Adelaide homes are taking a little longer to sell than they were a year ago, averaging 55 days to sell currently compared to 50 days a year ago.

SA Regional Outlook

Regional areas of South Australia have recorded a -1.2% decline in dwelling values over the past 12 months, highlighting the underperformance of SA’s regional housing market compared with the Adelaide market.

There are signs that there may be an improvement in regional South Australia housing over the coming year with sales transactions starting to lift. Over the three months to October 2016, CoreLogic estimates that there were 2,037 house and unit sales which was 12.4% higher than over the same period last year.

Although Adelaide rents have fallen over the past year, demand appears slightly stronger in regional South Australia with rents increasing by 1.0% to $240/week. Gross rental yields have increased over the year from 5.9% to 6.0%.

PERTH

Perth dwelling values have been falling since December 2014 and have since fallen by a total of -9.7%. Over the past 12 months values have continued to fall although the rate of decline has slowed of late with value down -3.7%. Houses have actually recorded a larger annual decline than units over the year with falls of -3.7% and -3.3% respectively.

Home sales have started to trend a little higher across Perth but they remain well below their previous peak. CoreLogic estimates that over the three months to October 2016 there were 7,843 houses and units sold which was 5.7% higher than over the same three month period last year.

Rental rates have continued to fall in Perth over the past year and have done so at a more rapid rate than the decline in home values which has dragged gross rental yields lower. House rents are -9.9% lower over the past year and unit rents have fallen by -8.7%. As at October 2016, gross rental yields in Perth were recorded at 3.7% which was down from 4.0% a year earlier.

Transacting a property has become more difficult over the past 12 months as values have fallen and demand has dropped. It currently takes an average of 79 days to sell a home in Perth which is up from 67 days 12 months ago.

WA Regional Outlook

The decline in values across regional Western Australia has gathered pace over the past year with house values falling by 8.7%. The market continued to be dragged much lower by value falls in mining regions while agricultural and lifestyle markets are also generally seeing falls albeit they are in most instances more moderate.

Although values have continued to fall over the year, sales transactions appear to have moved through a floor 12 months ago with transaction numbers consistently rising since that time. CoreLogic estimates that there were 2,242 house and unit sales over the three months to October 2016 which was 8.2% higher than sales over the same period in 2015.

Rental markets have also eased, with the average weekly rental rate across the regional areas of the state falling by a substantial -9.5% over the year. The typical regional dwelling is now renting for $325/week. Gross rental yields have increased from 5.8% a year ago to 6.9% currently.

DARWIN

Dwelling values across Darwin have fallen further over the 12 months to October 2016, down -3.8%. Values in Darwin have been falling since they reached their end of month peak in May 2014 and are now down by -9.2% since this time. Looking at the performance of houses and units over the past year shows that house values have slumped by -6.6% while the more volatile unit sector has seen the index reading rise by 10.2%.

Transaction volumes in Darwin remain low however, they have increased relative to a year ago. Based on CoreLogic estimates there were 679 transactions over the three months to October 2016 which was 30.8% higher than over the same three month period a year ago.

Over the 12 months to October 2016, Darwin house rents have fallen by -10.0% while unit rents have recorded a greater -23.9% fall. With rents falling at a much greater rate than values, gross rental yields have been dragged lower. Gross rental yields were recorded at 5.2% for houses and 6.1% for units a year ago compared to 5.0% and 4.1% respectively currently.

Although housing market conditions have continued to weaken over the past 12 months, average days on market data indicates it has become slightly easier to sell a home over the year. 12 months ago it took an average of 89 days to sell a home compared to 71 days currently.

CANBERRA

Canberra’s housing market has strengthened over the past year with values rising by 7.9% compared to an increase of 4.5% at the same time a year ago. This growth has occurred following weak housing market conditions over recent years in which values have increased by just 15.8% over the past five years. Houses have increased by a much higher 8.2% over the past year compared to a 3.2% increase in unit values.

Over recent months sales transactions have begun to increase however, they remain lower than they were a year ago. Over the three months to October 2016 there were 2,025 house and unit sales across the city which was -3.6% fewer than over the same period last year.

Rental demand has increased in Canberra over the past year with annual rental growth accelerating. House rents have increased by 6.8% over the last 12 months with unit rents increasing by 3.3% over the period. Value growth has still outpaced rental growth which has caused gross rental yields to ease from 4.1% a year ago to 4.0% currently.

With the improvement in housing market conditions over the past year homes are now selling quicker across the city. Homes currently take an average of 35 days to sell compared to 44 days a year ago.

HOBART

The Hobart housing market has experienced an acceleration in value growth over the past year with values rising by 5.0%. The improvement in value growth comes following more than a decade of weak conditions in which values rose by just 11.4% over the past 10 years. Over the past year house values have risen by 4.7% while unit values have increased at a more rapid pace, up 8.3%.

The number of transactions in Hobart is lower over the year, with low stock levels and rising housing demand appearing to be encouraging growth in home values. Over the three months to October 2016, CoreLogic estimates there were 998 houses and units sold in Hobart which is -14.6% lower than the same period in 2015.

Hobart rental growth has accelerated over the past year with house rents lifting by 5.7% and unit rents up 13.9%. Gross rental yields for houses were unchanged over the year at 5.3% while yield for units rose as rental growth outstripped value growth, increasing to 5.6% from 5.3%.

The average time it takes to sell a Hobart home has fallen slightly over the year to 52 days currently from 59 days a year ago.

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